Electricity Rebates Lead to Decrease in Australian Inflation to 3.5 Percent in July

In July, Australia’s annual inflation slightly eased due to a decline in electricity prices caused by government rebates.

However, this reduction was counteracted by hikes in food, clothing, alcohol, non-alcoholic beverages, and gas prices. Housing costs also went up in July but at a slower rate than in June.

According to the Australian Bureau of Statistics (ABS), the monthly Consumer Price Index (CPI) rose by 3.5 percent in the 12 months leading to July 2024, down from 3.8 percent the previous month.

Housing expenses increased by 4 percent, food and non-alcoholic beverages by 3.8 percent, alcohol and tobacco by 7.2 percent, and transportation by 3.4 percent year-on-year.

Leigh Merrington, the Acting ABS head of prices statistics, noted that CPI inflation is often influenced by volatile price changes in items like automotive fuel, fruits and vegetables, and holiday travel.

Excluding these items from the headline CPI reveals underlying inflation, which was at 3.7 percent in July, down from 4.0 percent in June.

July’s headline inflation figure reached the lowest level since February, while underlying CPI reached the lowest level since January 2022.

Electricity Prices Decline Due to Rebates

Electricity prices dropped by 5.1 percent in the 12 months leading to July, a significant decrease from the 7.5 percent rise in June, attributed to new federal and state rebates according to the ABS.

Merrington explained, “Altogether, these rebates led to a 6.4 percent fall in the month of July. Excluding the rebates, electricity prices would have increased by 0.9 percent.”

Fruit and Vegetable Inflation Surges

Annual inflation for food and non-alcoholic beverages rose to 3.8 percent in July, up from 3.3 percent in June. Fruit and vegetable prices soared by 7.5 percent in the 12 months leading to July.

Housing inflation decreased to 4 percent in the 12 months to July from 5.5 percent in June, while rent inflation dropped to 6.9 percent for the year to July.

The Reserve Bank of Australia (RBA) is set to hold a board meeting from Sept. 23 to Sept. 24 to determine its next interest rate decision.

ANZ economists noted that electricity prices are likely to decrease significantly in August as rebates come into effect nationwide.

Inflation at a 4-Month Low: Treasurer

Treasurer Jim Chalmers mentioned that monthly inflation is now at a four-month low and trimmed mean inflation has reached a six-month low.

He added, “Our economic plan is all about tackling inflation and easing the cost of living without harming an already weak economy, and today’s data confirms our policies are making a meaningful difference.”

Shadow Treasurer Angus Taylor expressed the Coalition’s aim of achieving a permanent reduction in inflation and addressing housing issues in the country.

He emphasized, “It is about getting back to basics.”